China

Last summer we outlined how Chinese banks obscure trillions in credit risk.

The powers that be in Beijing aren’t particularly keen on allowing the banking sector to report “real” data on souring loans - especially given the fragile state of the country’s economy. In some cases, the Politburo will pressure banks to simply roll over bad debt, effectively kicking the can.

In addition, banks carry around 40% of their credit risk outside of “official loans.” Here’s what Fitch had to say last year:

Submitted by James Howard Kunstler via Kunstler.com,

It didn't take much to fizzle Friday's Japan NIRP-driven euphoria, when first ugly Chinese manufacturing (and service) PMI data reminded the world just what the bull in the, well, China shop is...

... leading to a 1.8% drop on the first day of February after Chinese stocks slid 23% in January with the nation’s manufacturing sector faces strong galewind challenges as the government plans to reduce excess industrial capacity and unleash troubling mass unemployment, while a weakening currency is spurring capital outflows.

One month ago, we first revealed that for one prominent winner from the subprime crisis, Hayman Capital's Kyle Bass, "the greatest investment opportunity right now" is to short the Chinese Yuan: as he explained "given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency." He even went so far as to give a timeframe: "we thi

After an almost unprecedented surge in credit (total social financing) and over-invoicing enabled a bounce in China's PMI data in December, both Manufacturing and Services data tumbled in January, confirming South Korean trade data. While manufacturing continues its contraction (dropping to 49.4, the weakest since Aug 2012), it is non-manufacturing's plunge from a one-year high "transition is happening, see" narrative to practically the weakest print since 2008. But apart from that all that, China is "stabilizing" according to officials.